An agile pivot

Kazia Therapeutics 13 January 2020 ADR Update
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Kazia Therapeutics

An agile pivot

GDC-0084 Phase II/III

Pharma & biotech

13 January 2020

ADR research

Price

$4.56

Market cap

$33m

ADR/Ord conversion ratio 10/1

Cash ($m) at 30 June 2019

3.7

ADRs in issue

7.2m

ADR code

KZIA

ADR exchange

NASDAQ

Underlying exchange

ASX

Depository

BNY

ADR share price performance

52-week high/low

$7.40

$2.28

Business description

Kazia Therapeutics is an ASX- and Nasdaq-listed biotechnology company. It is developing the PI3K/mTOR inhibitor GDC-0084 for drug-resistant brain cancer and Cantrixil for ovarian cancer.

Next events

Cantrixil Phase I preliminary efficacy data

H120

Interim FY20 results

Q120

AGILE recruitment

Q2/Q320

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Kazia Therapeutics is a research client of Edison Investment Research Limited

Kazia Therapeutics has announced that GDC-0084, its promising glioblastoma drug, will join (subject to definitive agreement) the pivotal GBM AGILE trial. AGILE is a clinician-led trial that currently enables fast access to 11 US glioblastoma centers. GDC-0084 could be dosed from Q2/Q3 CY20. Data from the 20-patient stage of the GDC-0084 Phase II should be available during 2020. Our indicative value remains at $93m.

Year end

Revenue ($m)

PTP*
($m)

EPADR
(c)

DPADR
($)

P/E
(x)

Gross yield
(%)

06/18

2.2

(8.4)

(16.84)

0.0

N/A

N/A

06/19

1.1

(5.9)

(9.80)

0.0

N/A

N/A

06/20e

1.1

(6.6)

(9.60)

0.0

N/A

N/A

06/21e

1.1

(8.4)

(13.60)

0.0

N/A

N/A

Note: *PBT and EPS are normalized, excluding exceptionals and share-based payments.

AGILE: A new approach to a potentially pivotal study

The Glioblastoma (GBM) Adaptive Global Innovative Learning Environment (GBM AGILE, NCT03970447) trial is an adaptive Phase II/III platform designed to evaluate multiple therapies against one rolling control group; it currently has 11 US centers and plans to add leading international centers to its network. It is a clinician-led trial with an FDA-agreed single Master Clinical Trial Application. On entering the study, the newly diagnosed GBM AGILE patients undergo surgery to remove the tumor followed by radiation therapy combined with temozolomide (TMZ) (Stupp regimen). The difference tested is overall survival in the randomized maintenance phase using either TMZ or GDC-0084.

AGILE uses a stage 1, which recruits up to 150 patients to assess efficacy compared against patients with a similar profile in the control arm. If this stage appears positive, up to 50 patients might be recruited to a stage 2 expansion cohort for confirmatory data. Currently, the kinase inhibitor regorafenib (Stivarga, Bayer), approved for advanced gastrointestinal cancers but not GBM, is being tested. AGILE has several advantages: a faster start, an existing design and an expanding infrastructure plus involvement of key opinion leaders, a big benefit in the event of positive data, regulatory review and launch. However, Kazia will not have direct control over the study, so any problems or delays might take longer to resolve.

Kazia presented a poster in 2019 on the Phase IIa (NCT03522298) GDC-0084 dose-ranging results showing median progression-free survival (PFS) of 8.4 months in TMZ-resistant patients. Published studies indicate comparison PFS values of 5.9 months. Kazia is recruiting a 20-patient expansion cohort and further data should be available during 2020; this will help to inform AGILE expectations.

Cantrixil efficacy indications expected in 2020

Cantrixil is in a small Phase I study, with results expected by management in H120. Cantrixil could become a standard treatment for third-line ovarian cancer patients who now have few therapy alternatives. Interim data were presented in September.

Valuation: Indicative value of $93m

Kazia is aiming for a 2024 GDC-0084 US launch. It had $3.7m cash at 30 June 2019, boosted in H120 by a $2.6m net placing and the expected cash $1.0m tax credit in December. We maintain our indicative value of $93m ($12.9/share). We have assumed that Cantrixil will be partnered If the current trial data is strong.

Exhibit 1: Financial summary

 

US$000s

2018

2019

2020e

2021e

Year end 30 June

AASB

AASB

AASB

AASB

PROFIT & LOSS

Sales, royalties, milestones

527

26

0

0

Other (includes R&D tax rebate)

1,672

1,088

1,140

1,140

Revenue

 

 

2,199

1,114

1,140

1,140

R&D expenses

(7,428)

(4,921)

(5,472)

(6,916)

SG&A expenses

(3,079)

(1,972)

(2,280)

(2,660)

Other

0

0

0

0

EBITDA

 

 

(8,308)

(5,779)

(6,612)

(8,436)

Operating Profit (before GW and except.)

 

 

(8,468)

(5,861)

(6,612)

(8,436)

Intangible Amortization

(1,016)

(824)

(760)

(760)

Exceptionals

6,392

0

0

0

Operating Profit

(5,082)

(8,032)

(7,372)

(9,196)

Net Interest

91

0

0

0

Profit Before Tax (norm)

 

 

(8,378)

(5,861)

(6,612)

(8,436)

Profit Before Tax (reported)

 

 

(4,822)

(8,032)

(7,372)

(9,196)

Tax benefit

232

227

0

0

Profit After Tax (norm)

(8,146)

(5,634)

(6,612)

(8,436)

Profit After Tax (reported)

(4,590)

(7,805)

(7,372)

(9,196)

Average Number of Shares Outstanding (m)

48.4

57.5

68.9

72.2

Average Number of ADRs Outstanding (m)

4.84

5.75

6.89

7.22

EPS - normalized (c)

 

 

(16.84)

(9.80)

(9.60)

(13.60)

EPS - diluted

 

 

(16.04)

(9.39)

(9.26)

(11.29)

Dividend per share (c)

0.0

0.0

0.0

0.0

Earnings per ADR - normalized (c)

(168.4)

(98.0)

(96.0)

(136.0)

Earnings per ADR - diluted (c)

(160.4)

(93.9)

(92.6)

(112.9)

Dividend per ADR (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

14,376

10,383

9,623

8,863

Intangible Assets

11,080

10,255

9,495

8,735

Tangible Assets

1

0

0

0

Investments

3,295

128

128

128

Current Assets

 

 

7,037

5,711

1,987

1,911

Stocks

0

0

0

0

Debtors

1,927

1,300

1,300

1,300

Cash

4,527

4,129

405

329

Other

584

281

281

281

Current Liabilities

 

 

(2,955)

(1,444)

(1,444)

(1,444)

Creditors

(1,571)

(1,341)

(1,341)

(1,341)

Short term borrowings

0

0

0

0

Other

(1,384)

(103)

(103)

(103)

Long Term Liabilities

 

 

(3,835)

(3,862)

(3,862)

(12,222)

Long term borrowings

0

0

0

(8,360)

Other long term liabilities

(3,835)

(3,862)

(3,862)

(3,862)

Net Assets

 

 

14,624

10,788

6,304

(2,892)

CASH FLOW

Operating Cash Flow

 

 

(6,673)

(5,103)

(6,612)

(8,436)

Net Interest

91

0

0

0

Tax

0

0

0

0

Capex

0

0

0

0

Acquisitions/disposals

114

1,793

3,040

0

Equity Financing

0

2,900

0

0

Dividends

0

0

0

0

Other

0

0

(152)

8,360

Net Cash Flow

(6,469)

(410)

(3,724)

(76)

Opening net debt/(cash)

 

 

(10,986)

(4,527)

(4,129)

(405)

HP finance leases initiated

0

0

0

0

Other

10

12

0

(8,360)

Closing net debt/(cash)

 

 

(4,527)

(4,129)

(405)

8,031

Source: Kazia Therapeutics accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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